JPMorgan, Wells Fargo Upbeat on Mortgage Banking

Despite a drop in mortgage production revenue, the outlook remains positive amid a housing recovery, the companies said.

Wells Fargo and JPMorgan have capitalized on the success of the government's Home Affordable Refinance Program, which allows underwater borrowers with government-owned mortgages to refinance at lower rates.

The Federal Housing Finance Agency said Thursday that it will extend HARP by another two years to 2015.

Both banks said that the move was positive for the industry, although it would not make a material difference to them since most of their borrowers had already refinanced under the program.

While refinances were headed lower, Wells Fargo noted that there was still room for more refinancing activity at the bank with the average rate on their servicing portfolio at 4.75%.

There have been questions about the sustainability of the housing recovery once rates rise, but Wells CEO John Stumpf said the housing recovery was being driven in part by improving confidence. P/> -- Written by Shanthi Bharatwaj in New York.